Rome Apartments' Videos


22 Jan 2010

The Lock-in effect: How long still before we get caught up by OTAs?

Today we want to be ambitious and make a clear divination of our future.
Let me first decompose the supply side of our market.
The Omelette (see Entropy)
We have the Egg Yolk, the private owners and their listing websites and we have the Egg White, which is us, the Vacation Rental Managers. Sure, we're not cooking haute cuisine here, but it has paid our lunch well for over a decade.
Now look carefully and you'll see there is something else by the side, something that looked broken but is miraculously rebuilding itself: The Shell. No, it's not Google, it's the Third Party Distributors or OTAs (Online Travel Agencies) or, somewhat more scary and appropriate, The Aggregators: Expedia,, Orbitz and Travelocity. More to the point in our case: Flipkey
The Boltzmann exception: Entropy leading to Perfect Order (see Sean Carroll)
The Second Law of Thermodynamics has it that the degree of entropy in a closed system can only grow. Attending the books you shall never get that omelette to close back into its egg shelter... unless the Boltzmann exception kicks in: ie the statistical haphazard of something unlikely happening. Well, I think it's happening.
Entropy is making a big share of Vacation Rental Managers' income right now. If you peep into the clicking habits of your average client you'll see the traveler still googling the destination keyword (ie: rome apartment: I'm feeling lucky;) and working her way to the booking with at least 5 or 6 tabs open (4 different agencies websites + 1 or 2 feedback websites on the side).
Not for long, my dear readers and colleagues, let's face it, the egg shell is locking in on us. Travelers are an unfaithful bunch (attending PhoCusWright) and they don't care about our brand!
The lock-in effect (see Jaron Lanier)
Let me step back and look at what happened to hoteliers (let alone airliners). “Pricing power is currently in the hands of the OTAs" quoting Fuller, head of PhoCusWright Financial edition. 55% of internet travel accommodation bookings are made through online travel agencies (see also "The battle for your travel dollars" David Grossman on USA TODAY) and growing. Hoteliers are trying to fight back but it's too late (see the IHG pointless fight or the 'best rate guarantee' policy in the above article). The Noosphere is locking in. You and I don't want to waste our time and when it's time to book a hotel we go straight to an aggregator instead of googling our way through. When the habit locks in for vacation rentals, not just we'll have to pay TPD for exposure, they'll dictate the market price altogether.
The locksmith
Let's look at it positively. The omelette is still hot on the dish (albeit slowly cooling), Google and the googling habit is far from over. 'Entropy, quite literally, makes life possible' (From Eternity to Here) and is still all around us.
Vacation Rental Managers could use a bit of coopertition and hire a locksmith in the form of a free aggregator website. We should display all of our properties on one single aggregator website that respects each brand and funnels clients through for the bookings. Sure, there will be a lot of struggling to keep your prices that cent lower than competition, but the user experience will improve and, anyway, you have no choice!
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